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Tuesday, December 30, 2008

The posts have gone on long enough that they serve a basis for the necessary expositions (recent example). As mentioned before, there will be some posts that integrate within a theme from time to time. Examples are leveraging and fiction, in terms of the financial area (mainly, fairy dusting).

Then, through time, the posts will be, hopefully, coherent (as far as can be done with the temporal disparity of the web blog), and the integration posts will allow a better view than can come from categorizing.

Needless to say, those who think that the best and brightest offer what cannot be understood, by necessity, are way off base and probably deserve to lose THEIR money, but definitely these smarties ought to not have access to other peoples' money in many cases.

But, the view, hopefully, will be balanced. Engineering needs money to do its thing. Perhaps, the money side of things could learn from engineering and science. In that latter note, the work would go far beyond game theory to include a more broad philosophy.

Thursday, December 18, 2008

With a new year looming and with a coming change to the political and economic landscapes, the tone of the blog will need to adapt. All things are not by nature fraudulent (made-off shows the need for due diligence, but some people are trustworthy - yes, Boy Scouts, for one). Too, some know how to handle the map/territory problem.

So, let's start with leveraging (and its associated fiction). Earlier posts seem like diatribes in some cases, as they were not complete. As an aside, that is one drawback of the blogging paradigm; as, even with extensive linking, coherence is not as readily attained as it can be in sequential text.

Leveraging is not bad, in itself. After all, we have used the lever since Archimedes explained the principle and use. But, financial types went overboard with leveraging many times, including in the great market drop of 1929. Laws were put into place to limit using debt for things that were highly risky. These laws seem to have been forgotten, of late, as fairy dusting allowed magical returns to become realistically expected. Then, we had a mess; made-offing was the most recent example.

Friedman, in a recent article, noted that we need an ethical as well as a financial bailout. He used "I'll be gone" to describe a syndrome related to leveraging. In short, we had people thinking that someone else would have to clean up their mess. Why care about it when the perpetrator was long gone? (Yes, CEOs as diaper messers (we've said it before)). Friedman said that Madoff was the "cherry" on this cake of ours.

By the way, the article notes that we were not walking our talk. We were trying to shovel the 'casino' of capitalism under the rug while telling everyone else that we're the best.

One could probably argue that leveraging went awry due to misunderstandings. A common theme here is that computational and mathematical ideas have been interloped and used to screw things up. Take what we learned from the Modigliani-Miller theorem in which a type of equivalence is shown between debt and equity (to put it loosely). Gosh, folks, just look at the list of assumptions. A whole bunch of economists have built careers just looking at implications of this list.

One that we'll quibble about is the efficient market bit of fairy dust. Too, MM deals with a firm, yet who is usually a large holder of equity. The public, consumers all!! Yet, we counsel them to not indebted themselves in order to play the market (or used to, as a lesson from the Great Depression).

In short, there are intrinsic differences twixt equity and debt that MM does not eliminate. The discussion here would ask how anything wrong for those behind the firm could not hold in the collective. You see, look at the tranche mess (where crap was gathered, sliced/diced, then rated to not smell).

Okay, now, to look at an example of leveraging financially, consider the mortgage. Some of the older folks like to pay cash, for whatever reason, for their houses. Or, we saw movement of monies this way from sales in high-valued (using the term advisedly) area to a buy in a low-valued area (think CA to AZ, if you would). But, let's consider a normal situation.

If you want to buy a house with some form of down payment and then make periodic payments, that loan is a type of leverage. You will have some equity, with a lien, of course, and enjoy current benefits based upon future payment. One assumes that the future payment requirements will be met. Also, various risks are handled with things like home-owners insurance. All in all, this model has worked well for millions over the years. One could think of several examples like this. Perhaps, an enumeration of these would be a good thing to do here.

But, there are many things that went wrong. Such as, allowing leverages to be built (almost ad nauseum) upon leverages which is very suspect, just by definition. As well, some were put into mortgages without having the means to pay. We'll look at all of these at some point.

11/02/2010 -- Two years later, the message is the same, except some changes have occurred. Of real note is that the jobless rate is high; out-housing really set up for that. Also, we need to re-look at that learned from the 'vons' guys, Ludwig and Friedrich. See Near Zero.

So, expect some definition, plus itemization of examples around the various pieces of infrastructure built to sustain the gaming. Too, how do we ferret out all those 'made-offs' that are now in operation?

Actually, the whole argument that we're not dealing with near-zero sum is bogus. Why? Because the accounting is not extensive enough to show all the necessary relationships. Will we get there?

Well, 'when?' might be a good question. It's easy enough, via a mind game, to see how any of the richest got there through a giant sucking-out of multitudes and multitudes of pockets who, in many cases, were more hapless than not.

Hapless how? Look at those who took the direct hit from Madoff's games to see examples.

10/11/2009 -- Discussion has gone over to FED-aerated. Note the 10/11/2009 Remarks about the Business Week article on India's progress' inhibitors. 'Near zero' recognizes that some always suffer more than others, especially in win-win situations, as the whole notion of characterization minimizes visceral reactions by diminishing the real in favor of the abstracted (ah, the modern world, you say?).

12/18/2008 -- One thing to note in the Minsky hierarchy is a movement from the more concrete to the more abstract. Getting away from the gab standard would put a better basis on this, however any extrapolation goes awry (except in the special case of a linear extension - but even there we get to leveraging issues). All sorts of metaphors could apply, such as out-on-the-limb, bleeding-edge, ...

Tuesday, December 16, 2008

Earlier, 7oops7 asked if there would be another shoe to drop. Well, there have been a couple: Madoff (made off, with the money) and the Fed Fund rate drop to 0.25%.

Now, the former is pure crap; the WSJ opinion that this type of thing cannot be avoided (Editorial, 12/15/2008) is other than smart (yes, you guys are showing your biases). The WSJ said that cops cannot prevent buglary. Well, true in a sense. But, we sure in hell can reduce to a very low level the likelihood that a buglar can work his trade (security, being smart, ...).

The second shoe brings up another bit of silliness supported by the Fed and Chicago. It's the Fed's Funds Rate futures market from which many spend valuable hours trying to discern Fed movements. Hah! Talk about reading tea-leaves. And, we think that the western culture is so smart with its mathematics. This will be important due to the emphasis in this blog on the issues of quasi-empiricism. It's bad enough that we have the gab standard, now we have gaming (ah yes, derivatives) on top of that.

The blogger has to admit that some of the rantings about malfeasance due to computation and mathematics were based upon a set that did not include these two; yet, having these two as examples strengthens the set and provides a better case for discussing solutions.

As, both of these shoes deal more closely with the motivations of truth engineering than did things like those related to the golden boys (ah, count 'em: GS, BS, ..., almost interminable list).

08/24/2009 -- Last year, Ben blinked and panicked. He frantically pulled out all stops as if with no thought for tomorrow. Now, he has no use for 'mea culpa' big daddy that he is. Ben, start to unwind now. The Vienna School's view that these things are undecidable (which is a computational issue) is right on.

Thursday, December 11, 2008

There are many sides to truth which can prove to be troublesome in various situations.

Past truth is definitely different from future truth, as we might learn in some of cases. That is, much of now is a replay of before, yet how many times do we get into situations that were supposedly just a simple matter but things got complicated?

We will point to several of these, including the Boeing 787 which is now planned to fly in the second quarter of 2009 and be delivered in the first quarter of 2010. This latest round of estimates follows several which we'll itemize.

Can the plane go through its truth check, which is essentially what the flight test period stands for, in the short time that is now planned? Well, opinions differ. You know what? Those opinions don't amount to a hill of beans, usually.

Why? Well, with something real, like the plane, it has to actually work in a real setting. Now, we can evaluate whether it passed the tests in an ex post facto sense, but we cannot say that it will do so in a forward sense.

Boeing knows this as it has caveats posted about not having 20-20 foresight. Who does? The issue is whether we ought to continue to have the game where the future is predicted, then we all sit around and determine how close the prediction was?

Oh, wait!! That is what science claims for itself, does it not? But, is business and program management a matter of science? Well, that depends upon to whom you talk. Being frank, I'll say no.

What it is, and folks just look at the golden boys of the Street to see what I am talking about (did we not have to bail them out? And 'it is' means business playing like it's a science), is silly misuse of mathematics and computation.

No amount of computer modeling can stand in for nature or the real world. We'll always be getting back to that. Boeing ought to already know that risk management failed so far, in the large that is. No doubt, there are points where the plan worked. Some might say Spirit, except it's just a little Boeing, in a sense.

So, this plane is only one of several 'models' that we'll need to look at as we talk about why truth engineering is a necessary part of the future landscape, virtual and otherwise.

Wednesday, November 26, 2008

It's review time again, being Thanksgiving, which is a secular American holiday.

As noted in the banner, posts here concern 'being' (small t) and its importance; basically, trends, such as Lean, have removed being out of the modern mindset which may explain a whole lot of trouble.

But, let's start our analysis with Lean, as there will be more culprits. For those who don't know, Lean is an initiative that removes waste from a process, thereby reducing cost. It can help improve quality, too.

But, Lean deals with processes, not being. Process foci lead to protocols. As said before, protocols deal with averages. The world of being is not average, anywhere. Or, we could say that being is everywhere dense. Yet, we have been allowed to stumble along with our averages.

Until, that is, we see things like the 787 project and the current economic mess. These two have problems with similar etiologies.

The questions need to be analyzed and addressed under a Truth Engineering framework. That is our work for the coming year.

Remarks:

09/02/2009 -- Lean assumes a current framework which can be improved. That the process is still effective during the change can be checked easily. However, if it is not still effective or we do not have a stable framework, then we were, by necessity, in the undecidable state.

Business Week (11/24/08) wondered if "Islamic Finance may be on to something." But, the focus of the article was on how Islamic banks fared in the current situation of toxic debt. Well, "excessive debt" is not allowed.

One has to wonder how the western mind came up with the notion that leveraging was creative. Clever it may be; yet, stupid is another way to characterize the propensity to gamble away one's future.

Sharia-based methods do not mean not-modern, witness the debit-card offered by Mastercard that is compliant.

By the way, search at Business Week on 'Islamic Finance' and read more, if you are interested.

02/03/2009 -- It would do well to consider how the Islamic culture can add to the capitalism/socialism debates. One start might be to read about Islamic Economics, such as this insightful look at command versus free enterprise, albeit with other influences at hand.

Saturday, November 8, 2008

While talking about pseudo-science at CalTech, the late Michael Crichton mentioned that one problematic issue is thinking of computational output as data. Posts in this blog have ragged about that type of thing, to boot.

In one case, a claim might be made that erroneous outcomes in both design and planning are directly related to too much reliance on the computational framework. Where things can really go awry is during a long computational chain where results from one step are fed into another.

11/18/2008 -- One thing that engineering can do is test against reality. The better the effort in this regard, the more understanding of the underlying theory can improve. Unfortunately, financial engineering is handicapped from the beginning.

Thursday, November 6, 2008

Yes, sounds like the 'fictitious capital' idea of Marx. The phrase in the title was used in recent Congressional inquiries about the mess of the economy (but worse than casino, see Remarks on 01/29/2009). And, who was there? Fat cats and CEOS!!

Why can't we hear discussions about the hard stuff in regard to modeling, decisions, etc.?

Naturally, power has its ways and means. But, consider that the future may very well require in-depth and continual assessments on more than just what the suits like to see. Yes, we have to get technical.

It's like this: Hey suits (you know who you are) , your role has always been mostly ceremonial. What? Yes, the game (not that gaming is necessary) has descended to rewarding those whose greed can best be compared to that of an infant's for milk. Is that flattering or what?

So, this'll be a regular topic, as Truth Engineering is directly related to those technical issues of truth that are gamed by power, that are confounded by computer, and that are not easy in any regard since our best efforts are limited quasi-empirically.

01/30/2009 -- Corrected, in part (see 1/29/2009). Why? Well, CBOE-driven and other changes to market technology are ontologically game-centric which the 'casino' delimits well as a concept. That hedging leads to speculation and ponzi comes out of dynamics (see Minsky) that we need to understand better in order to control. And, that cannot be done without reigning in the misuse of mathematics (and malfeasance allowed due to the confounding). We'll have to look at this issue further.

01/29/2009 -- The Economist in its review of the current mess and the 'future of finance' makes an interesting point. We use 'casino' to deride the improper capitalistic bent. Yet, it's worse. "The numbers on a roulette wheel never change, but markets offer no guarantee that yesterday’s odds will be the same tomorrow." So, we stand corrected.

Monday, November 3, 2008

As mentioned before with the topics of fiction and leveraging, there needs to be some time occasionally where things lay quiet during a catch-up activity, such as looking more deeply into the recent advances (if one could call them that) of finance. Given that the gaming behind the market is mathematically colored and given that we need to get technical, some time will be spent immersed in details of the CBOE and related efforts, such as Options Monster.

Today, volatility was the theme that has a few interesting twists in its influence on the pricing of options. So, to look at that, we need to start with "the Greeks" and the related etiology.

Tuesday, October 28, 2008

As things unwind, there has been a lot of analysis appearing. Some of it is right on; some ought to be foundational. Recently, the Economist (Oct 19, 2008 - Greed is gone) mentioned that "Wall Street's finest have been humbled as never before" as they went from master to minion is a matter of a year. Actually, the flip-flop was going on longer; the decline was offset by the Fed meddling in order to keep the game going (Savers sacked).

Recently, we saw the Naked Economist claim that we're in a twilight of "free-market ideology" and describes some of the beliefs that being shown to be myths. Yes, is there such a thing as a free-market or free anything, for that matter? Well, the whole notion depends on several things.

But, essentially, nothing happens that does not expend energy. We'll need to show that the market is near-zero sum (almost always and everywhere) in response to the common belief being touted by those economists who want gaming as the ontological basis.

10/11/2009 -- Discussion has gone over to FED-aerated. Note the 10/11/2009 Remarks about the Business Week article on India's progress' inhibitors. 'Near zero' recognizes that some always suffer more than others, especially in win-win situations, as the whole notion of characterization minimizes visceral reactions by diminishing the real in favor of the abstracted (ah, the modern world, you say?).

09/12/2009 -- Sandbox was used without definition. Let's discuss that concept.

03/30/2009 -- The WSJ today looks at the Future of Finance. The idea is that finance is like the cardiovascular system. Okay. So leeches are a good metaphor for the sucking out that we see. Like the AIG guy who was central to the losses that we the taxpayers are paying and who left with $300M. We'll be referring back to this discussion.

12/01/2008 -- We need to learn what we might be taught about money by Islamic Finance.

10/30/2008 -- Yes, many people see the misuse of mathematics. But, how could the financial people not see the fiduciary (which seems to get lost in gaming) and public trusts that are associated with their work? How did the notion arise that these guys can just play with people's money, in their giant sandbox, where outcomes are secondary to winning little games and lining ones pockets?

Friday, October 24, 2008

We'll get technical after some jaw-boning. To date, the evaluation schemes seem to have been mostly measuring of pocket-books. That is, the richest are the best and brightest according to this view. We'll have to address that once more and in a better fashion.

Too, flim-flam of bad theoretics (game and otherwise), plus notions that stochastic applied to fundamentals like calculus adds in a metaphysical aura, and just bad ontology, all contribute to the confusion.

As in a lot of bubbles, the young 'uns were allowed to run around without supervision as most oldies could not handle the necessary details. Well, one lesson we might learn is that those who can are still able to process and understand mathematics after the age of 25. That is, understand with the qualifications put by old John von Neuman himself, namely we just get used to it.

Also, computations applied by quants need to be sensitive to the lessons of Chaitin's views on topsy-turviness in the modern age.

12/18/2008 -- Well, things really fell apart in the 3rd Quarter of 2008. Of course, the tranche was only one factor. Others include the players and the games. Now, games include using mathematics erroneously, as in getting an aura from the use of derivatives (to be discussed further). We'll have to re-address the map/territory issue.

Monday, October 20, 2008

One might blame recent actions (of the Fed and Treasury) on the fact that this is an election year whose resolution is quickly approaching. Why the use of insanity?

Well, the real-time experimentation (by the Fed and Treasury) continues based upon a gab-standard. Those who got us in this mess like to use 'financial engineering' as their chief flag to salute. Hah!

Well, we do know better than that. That so much has been spent in bolstering up the infrastructure for the gaming and in putting our taxpayers money in the game could be seen as really troublesome. But, it's only money; yet, the lives of real people are impacted by the decisions of the few.

Has it ever been different? Well, no. But, the problem now is that technology exacerbates the effect; too, the gaming ontology is technologically based and unstable.

01/29/2009 -- Earlier, there were some words put here about Truth, Fiction, and Finance. Well, pick up the 1/28/09 Wall Street Journal and look at an article about a 'proliferation' of ponzi schemes. We all know about Madoff as he mis-handled a lot of moeney over a long period of time. But, a lot of states are finding that they have a madeoff/ponzi going on within their borders. How much of finance is a sham?

The WSJ mentions that the hedge funds' claims to high returns is one possible cause as people try to duplicate that. Sort of a Jones' keep up thing, we can suppose. Well, a reading of hedge fund tacits raises all sorts of suspicions to the rational mind. Just how legit are these things and why are they even allowed? Are we that much into some mass insanity?

12/17/2008 -- Too, many factors lead to things like made-offing and other schemes.

Friday, October 10, 2008

-- get physical with money, remove the gab standard (forget gold, there are many ways to do this)
-- reward the savers (monotonically - even if small)
-- remove the gamers and derivatives (use a sandbox - CBOE for one)
-- have a goal orientation other than gross accumulation
-- wize up to the motivations for pseudo-globalization (currently, just colonialism - for people like Jim M)
-- respect for workers, those who touch matter (rather than exaltation of the financial gamers)
-- realize that we can judge worth (there are many ways to do this intrinsically - of course, physically-based money would be a start) and know bubbles (and other idiocies - see below Remarks on poopy diapers)
-- alter the basis for 'quants' approaches, using quasi-empicially motivated insights
-- learn the lessons recently grasped by Alan (capitalistic endeavors need oversight, derivatives are deadly if left to toxic means, identify and handle bubbles early on, ...)
-- consider other issues, such as what we can learn from Islamic finance
-- ...

12/03/2015 -- Still true, albeit the phrasing might be improved. Modern context: Are derivatives evil?

11/05/2010 -- Big Ben is still putting us at risk and trashing the savers. There has been a lot of water under the bridge. Sure enough, Ben was out of bullets early. Now, he's starting to tear into the structure in order to have something to throw at the target.

09/12/2009 -- Sandbox was used without definition. Let's discuss that concept.

Saturday, October 4, 2008

This latest post-mania dump is very interesting. The WSJ has a whole section devoted to the subject, including discussions about the bailout. So, let's name a few of the culprits who caused the problem that we, the taxpayers, are going to have to pay to resolve.

- Government, believe it or not. Several initiatives oriented toward extending home-ownership to the less well-to-do are related to the mess. Freddie and Fannie went haywire, to boot, using the goodwill extended by their special status. Even, old Sallie was troublesome (pity the poor students; pox to those who lined their pockets). The main issue here is that the pseudo-capitalists running those quasi-shows really lined their pockets (without an payback being deemed necessary).
- Gamers, namely those who helped build and use the 'gambling' palaces of Wall Street and Chicago. One technique took things that were worse than junk (think, sub-prime) and layered on them some glorious thought related to value. As if the AAA rating comes out of nothing.
- Regulators, not doing their job, as they were given to believe that it was no longer necessary or that they could not make judgments (thanks to Alan and Ben, et al). Oh yes, says Alan, we clean up the poop afterward. Ah, like a baby's diaper?
- The less than well-off who bought the dream of the house that always increases in value. Of course, that such increases lined a few pockets does indicate that some type of appreciation can happen; that 'capital' theory looks elsewhere is the story to tell.
- Those smart cats who thought that mathematics and computing would tie up the world's messiness, especially those from engineering and science who may have gone to help make that whole gaming ontology more unstable.
- CEOs and others who think that the world is their big oyster to eat by divine right, usually to the detriment of the doers.
- Workers who laze on the job and don't work (this added to be fair to all sides).
- Investors who look for the quick buck (albeit, some of the super rich did just that - the near-zero aspect of the game would point to any outsized reward as not moral or ethical, and perhaps, not legal.
- ...

This can be a long list. What will be the next mania? Is is already started?

09/19/2013 -- To some, evidently, grabbing oodles of money, without due consideration of ramifications to others or to the common weal, is the smartest thing; but, we do know that virtue is smart, to boot. Even the secularists are trying hard to show how their worldview can lead to right living (as in, they do not need God to have a conscience). And, what virtue might be prime important to this discussion? Prudence (see Remarks, this day).

10/11/2009 -- Discussion has gone over to FED-aerated. Note the 10/11/2009 Remarks about the Business Week article on India's progress' inhibitors. 'Near zero' recognizes that some always suffer more than others, especially in win-win situations, as the whole notion of characterization minimizes visceral reactions by diminishing the real in favor of the abstracted (ah, the modern world, you say?).

Thursday, September 25, 2008

It goes like this. We have something of substance (which money, currently, is not) about which we want to establish trade (in a general sense). Then, through progressive means, we turn out to have a market system that is highfalutin and computer driven.

Well, one natural outcome is hedging which plays on marginal changes, that is, hedging is related to something as is acceleration to velocity. So, then we get speculation as the next step. Well, using the geometric metaphor, we get to the change in acceleration. Guess what this is called? Jerk! (see Note 1, 3rd derivative related to motion)

Ah, that is rich!! The speculator as a potential jerk; you see, we cannot disallow this necessary practice; we can make it more insightful, honest, and of real power. But, speculation ought to be linked to hypothesis testing, a necessary component of advanced thinking (not happy talking).

Anyway, we have then a natural leap to higher dimensional entities, of which 'ponzi-ness' can be attributed to the first step. Except, there is a better concept which we'll get to (in time).

The argument is that there is an inherent instability involved, so the consequence would be our expectation of bubbles. Well, that is only partly true, as plenty of folks do not partake in mania.

Somehow, we've let a favored few (supposed the best and brightest -sheesh, give me a break) monkey about and screw up the works for the rest of us.

We'll be following this argument further is search of possible damping means.

08/20/2009 -- Note 1: 'Derivative(s)' has been used a few times in the posts. The context may imply the usage, hopefully. But, in general, we're talking two types. 1) from finance, where 'derived from' is the proper interpretation (or as one may surmise from posts here and elsewhere, something from nothing). 2) the usual mathematical variety.

Monday, September 22, 2008

Well, Goldman Sachs latest move changes the game for us, too. You see, the financial world has been selling gold-plated crap for awhile. But, then, that game has been going on for awhile.

So, with GS asking us (the American taxpayer) for help, we can no longer sit idle. Not that we've been idle, it's just that it is very hard to argue with success. And, GS was the golden boy of the era that just past.

What Nose is needed for the future? That'll unfold here. How many years? Not important, as we're talking the basis for the coming generations.

Tuesday, September 16, 2008

We can probably see that the computer has added a certain type of proof to the list. That is, operationally, we do not have to go all the way to a formal mathematical proof, in many cases. We had this in the past, but modern methods speed things up, allow greater access to data, and enable lightening fast calculations.

Though, we'll also see the continuing upward pace of papers dealing with specific proofs.

What does the title mean? Well, the web business model has spawned all sorts of uses of mathematics that goes against the grain. That is, marketers use methods to raise sales. Well, if it works, then that's nice. Try to explain things, though, and that is more difficult.

One consequence for the marketer would be angry users who don' t like being targeted.

But, that misuse pales in comparison to some others, like too heavy use of modeling for systems and their components versus real testing (to be defined further).

Aside: Actually, the worse case is some minds, like those at Harvard Business School, making such intense use of regression. What? Teach managers a little mathematics, and they're Einsteins? Yes, a whole generation of supposedly bright people have led us down the path to 'perdition' while at the same time making oodles of bucks. Oh, Lord!!! Deliver us!! (We intend to go on about this at length as the financial types are visible nowadays; yet, engineers, you too have been amiss; perhaps, the first part of the 21st century can shore up 20th century failings).

But, we can call the operational proof that is suggested by the marketeers (of all sorts, on the web) a 'swarm' proof bowing to the work related to the wisdom of crowds (put link here).

In a sense, one could use the concept for analyzing current events. For instance, could one ask if a modern program was 'swarm' related (both in the interest of the airlines (who are those who put their earned bucks out) and the public (whose initial bucks, albeit smaller by entity, are in the game, too)? This is only partly related to the internet (mind you, discussion of the program goes way back on the web, only, of late, accelerating to break-neck speed).

Now, truth engineering is to help define proof types, their use, and their risks. Not to tread on creativity but to foster proper use. 'Risk' and its management is a new science; that those there may have hubris (or is it just the manager's interpretation that is at fault?) ought to give them, and us, some pause (nods to old William F. Buckley).

Sunday, September 14, 2008

Reuters reports on Sunday dealt very closely with what we have been discussing.

Then, yesterday's news had it splattered everywhere. The failures continue.

Well, the causes are varied, but the culpability of the Fed (and the economic community) cannot be denied. Alan says that we can't see crap until it happens. Ben continues in that vein. So, then, the taxpayers have to clean up the mess, ex post facto.

Look, it's not that difficult, folks.

- put money on some real basis (remove the gab standard) and minimize the political aspect (yes, this is possible)- financial instruments need to be scrutinized (including testing in a sandbox) in a worldview that understands why we have, and can know our, limits (quasi-empirical arguments are apropos)- rearrange the thinking about the (supposed) mathematical support for this craziness (it's pseudo-math running amok)- oh, by the way, tie computational modeling into truth engineering (I'm not after riches, folks)- the basis for the future ought to prime in the economy, even over-lording what leads to greed, namely private profit maximization (Minsky's hierarchy is apropos). Besides, it's near-zero sum. Those whose arguments are for non-zero sum need to get their heads out of their illusion.- establish some means to ensure that financials are tied to intrinsics (to be defined, but Buffet's attitude toward what he invests in is, in part, an example)

Remarks:

10/11/2009 -- Discussion has gone over to FED-aerated. Note the 10/11/2009 Remarks about the Business Week article on India's progress' inhibitors. 'Near zero' recognizes that some always suffer more than others, especially in win-win situations, as the whole notion of characterization minimizes visceral reactions by diminishing the real in favor of the abstracted (ah, the modern world, you say?).

09/12/2009 -- Sandbox was used without definition. Let's discuss that concept.

09/25/2008 -- A concept that can bridge the waters and allow a larger set of associations is 'fraud power' in reference to modern financial methods.

Saturday, September 13, 2008

There are probably other ways to partition this thing, however we'll start with what the title says, as promised. You see, we're looking at what has gone down the past few decades such that we see larger accumulations of wealth in the hand of a smaller set than before. At the same time, the set of those without has grown substantially. So, we may start with one partition and move around to others as needed for the discussion.

What is a doer? Well, there was an earlier example of grain futures. The 'doer' class would cover a spectrum, from those providing seed, to the grower, to those who make use of the grain; even those who eat the grain would be in the class. Now, within the class there may be a way to measure the extent of membership (this extent may have some intrinsic value - that we will consider - yes, even in this day and age). The doer is trying to make his daily bread.

The speculator deals only with abstractions and the monetary associations thereof. We have to be careful here, as the doers will have their set of abstractions too. For instance, a grower (even as a doer, using acceptable levels of hedging) would deal with an abstract model related to decisions when trying to discern some choice in a 'futures' situation. Perhaps, there ought to be a different term used here; we'll consider that a research topic. But, the speculator has his daily bread; he's after the whole pie.

In the meantime, the use of 'abstraction' (probably in the extreme sense of 'abstract' nonsense - apologies to the category theorists) is apropos. The speculator has no intrinsic interest in the grain against which he or she may be gaming; this applies across the board as grain is only being used for example here; any other commodity would come into play.

And, the speculator would not have to be easily characterized by some prototypical notions, such as we see with the day trader. In general, it would be some 'big pocket' position; yet, what we have seen is that the 'gaming' allows privileges to the speculator that prevent in-the-large maximization across the whole. Oh, what the hell does that mean?

We'll look at that further next time; but, for now, let's just consider that the doers work with things that improve our lives through direct effort or through their efforts with others. What do the speculators bring except grief?

Remarks:

03/25/2013 -- The Atlantic had an article about King Abdullah II. Now, he is an example of a doer, from several angles. What I liked when I read it was that while being educated in Massachusetts, he bussed tables. What that means for those who don't know is clean up dirty dishes and such. When I, as a young man, was in the US Army, we had still had KP duty which included such types of things. Another task that ought to be tried once by everyone: cleaning the grease pit.

However, we ought to look at how close free is to fee (both are old english), namely one letter. But, let's just limit things to that observation, for now.

Basically, we have those who claim that 'free' is what we're after in several regards, such as market, trade, and what have you. Well, many say that thing that we're looking for with 'free' is an illusion that needs to be tempered and to be seen as the ideal that it is.

But, wait, one can use doers (and not) in this context. In actuality, doers always use energy and resources, even though it may be that many doers seem to make things appear to be effortless. Actually, that magical touch is one characteristic of excellence. Yet, no amount of easy accomplishment happens without some expenditure.

And, fee is only being used facetiously, as fees, hidden or otherwise, are always there. We all know, though (and learn), to watch that those 'greased slides' referred to in another post don't move monies from our pockets; that is, who wants to be included among the hapless? What is the adage: once burned, twice shy?

Another type of basis for these things could easily bring in better means to look at what happens in economical terms; as an example, perhaps energy processing, as a metaphor, would be stronger than has been allowed.

So, we'll need to look further at doers, as promised; too, a better characterization of non-doer (oh, perhaps free may apply here, as in something for nothing) might be in order.

Remarks:

03/25/2013 -- The Atlantic had an article about King Abdullah II. Now, he is an example of a doer, from several angles. What I liked when I read it was that while being educated in Massachusetts, he bussed tables. What that means for those who don't know is clean up dirty dishes and such. When I, as a young man, was in the US Army, we had still had KP duty which included such types of things. Another task that ought to be tried once by everyone: cleaning the grease pit.

Wednesday, August 20, 2008

In order to establish where things may have gone awry and why it will be necessary to look at what has gone on and from when. That is, there have been claims here of a gaming-centric ontology going bad; well, let's see what that might mean.

So, at the bottom, let's suppose that we can look at two classes of people, doers and speculators (next post). Now, the doers are those who keep the world going with their efforts; for many of these, life is a drudge with very little payback; for others who are the real cream of life (by aptitude, attitude and application), their talents get used however without sufficient reward; we could characterize this useful set (the old adage of the ant works) for a long time and with a whole bunch of words (but let's not, yet).

Those other type abounds, too, yet, the world has continued despite their machinations (speaking of the old adage, we're talking the grasshopper). You know, financiers might fall within this realm. Back at some point, one thought of financing as being involved in production or transportation or something else real. But, guess what. Around 1973, the fact that the mathematics was understood (having been created by doers, mind you) and that there were sufficient advances in the computational led to what was done at the CBOE and to provide the means to enable financial gaming to a maximum extent.

What happened? Well, option processing, essentially. Options are only one of several types of derivatives. Yet, they are a good example to analyze their problems to attempt to lay out a better framework for financial economics that would somehow inhibit forthiness and other problems.

Too, a proper viewpoint might help balance that mindset that glorifies riches (gosh, even a premier Ivy League school which started for the glorification of God [early motto: For Christ and the Church] is a player and raker) and allows the pockets of the hapless to be picked with impunity.

The exercising of an 'option' is a type of leverage; we will need to enumerate types of leverage, such as silly game 1, silly game 2, etc.

The whole notion is that economics (financial and otherwise) can get divorced from reality. Fortunately, engineering does not have this problem so much. But, when we apply engineering to finance, watch out! As Buckley, stop and think. How do we get back some realness for several reasons (such as, allowing the boomers to have a reasonable retirement)?

Remarks:

03/25/2013 -- The Atlantic had an article about King Abdullah II. Now, he is an example of a doer, from several angles. What I liked when I read it was that while being educated in Massachusetts, he bussed tables. What that means for those who don't know is clean up dirty dishes and such. When I, as a young man, was in the US Army, we had still had KP duty which included such types of things. Another task that ought to be tried once by everyone: cleaning the grease pit.

12/18/2008 -- Things were going along so fast (the meltdown, made-off, ...) that the basic message got lost. We'll start again with a new look at leveraging.

09/14/2008 -- Minsky's hierarchy is very much apropos, here, among other things. Probably, anything beyond hedging (which is respectful, if done right) and part of speculation (perhaps, halfway along some spectrum that could very well be defined) would be consider suspect and definitely ponzi-like.

Alan's and Ben's (you guys need to rethink your position) position that we cannot see crap when it is happening (oh no, says Alan, we can only clean up after the fact) is very much indicative of how blind is their sight. The proper tools are there, folks.

Sunday, August 3, 2008

Yes, we can thank ABBA for the title; as well, don't you think that money by any other name is just as troublesome?

As we start to look at money, what it does to people, how it leads to silliness, and all sort of other things, we ought to see that there has been a lot of discussion from many angles on this subject.

That finance takes its lead from macroeconomics which takes its lead from mathematics will be at the fore. Perhaps, it's time to re-look at the whole mess. The trouble is that the world cannot stop while we try to understand and re-adjust.

So, we know that the Monday to Friday games have already started for this week; sympathies to those who will lose; a message to those who will win that little and big 't' issues remain to be considered.

- Money is the basis of the price system, but there have been many other types of models proposed which can be classified as heterodox (there is still an issue of the computational support requirement). What was referred to before as intrinsic value needs attention as well.

- In this discussion, we'll be bringing in some t-issues; that wealth is not measured well in the price system will be one topic.

- Given that we have paper and coins and more, perhaps there is some basis that could be applied other than any used so far. What was referred to before as the gab standard is apropos and will be looked at further.

Finally, we'll be getting into how 'being' relates to what we know of as money.

Thursday, July 31, 2008

We're going to go back and look at money, from a foundational sense. That is, money plays roles far beyond what the modern abstraction-ist view can allow in their model. The roles cover a gamut, including a major one at the core of things.

And, the modern view fails due to several things, such as bad use of mathematics, for one thing. What we see as a result is a tipsy affair where money (in one its aspects, namely the wealth accumulation variety) rolls into fewer and fewer pockets, that loom in tremendous size. On the other side, the hapless set, which is of larger cardinality than it ought to be, finds its pockets being picked regularly, in many cases via questionable practices.

So, rather than just rant and spout off, let's start the long process toward a new view that may help clarify some issues. Like what? Well, why 'moral hazard-ness' is discernible even if no-one has the guts to state it. And, we can have a better way for all folk, not just the favored few.

Wednesday, July 30, 2008

One example of the types of financial gaming that have evolved with the relaxation of rules is the naked short. Supposedly, this type of maneuver was illegal except for a few favored types. Earlier, the SEC put some restrictions to protect Mac and Mae; they were extended somewhat; some wonder why these restrictions don't apply more generally.

So, we'll have to take a look at why 'shorts' are even allowed in the first place; then, let's ponder why any would be allowed to be as 'naked' as the jaybird.

Some claim that this has been a technique used by some hedge funds which are notably opaque in their desire to protect their playing field while the tricks are being played. The subject of the hedge fund is quite timely and can bear a lot of scrutiny. Of course, all the information used will be that which is already in the public domain. It's just that there is a grating relationship between truth engineering and those positions that the hedge fund represents; note that the grating isn't unpleasant as we learn from such things.

But, there are more techniques than the short involved here. Risk management will be another major topic to pursue; that it applies, as well, to the project management side of things is noteworthy.